Lobbying the BEAD Rules

Thirteen Republican Senators sent a letter to the NTIA asking the agency to change its approach in administering some of the provisions of the $42.5 billion BEAD grants. This is just one of the first of what I think will be many attempts to influence how the grant funding is awarded. We can’t ignore that there will be politics involved in determining who gets grant awards. That became inevitable for a grant program of $42.5 billion that also involves the States.

The letter specifically asked for changes related to rate regulation, technology preference, provider preference, workforce requirements, middle mile deployments, and the application review process.

Rate Regulation. The Senators point out that the legislation has a specific prohibition of the BEAD program suggesting or requiring broadband rates. The letter argues that the NOFO for the program suggests several requirements that will set or restrict rates, such as a suggestion that there should be a low-cost option established at $30 along with a still-undefined middle-class affordability plan.

Technology Neutrality. The Senators take exception to the NTIA’s clear preference for fiber and want to make sure that fixed wireless and cable technologies can be considered for grants.

Preferences for Grant Recipients. The Senators are concerned that the NOFO for the program insists that there is an equitable and nondiscriminatory focus for choosing grant winners. They fear that this is going to push state grant offices to favor non-traditional broadband providers instead of existing proven ISPs.

BEAD and Digital Equity Participation. The Senators want to make sure that there is no automatic link between a State participating in both the BEAD program and the Digital Equity program. This is the first time I’ve heard of this issue, and this means there are States considering not accepting the funding that will be used for getting computers into homes and offering digital literacy training.

Workforce Preference. The Senators believe that the BEAD rules favor ISPs that use a ‘directly employed workforce’ as opposed to contractors and subcontractors. That observation was a new one for me and will send me back to reading the NOFO more carefully. The Senators are also worried about the requirement that projects greater than $35 million must enter into a project labor agreement – something they say will be challenging in a market with a skilled labor shortage.

Middle-Mile Deployment. The Senators don’t like the requirement that any project that includes middle-mile routes must allow for interconnection with other carriers that want to use the fiber routes.

Unnecessary Burdens. The Senators say there are requirements that add burdens on grant applicants that were not included in the legislation. This includes issues such climate resiliency and system hardening for the useful life of fiber. They say such requirements add unnecessary costs and will delay the deployment of networks.

It’s an interesting list of objections. A few of the objections are on everybody’s hate list of the grant rules. Grant applicants do not want to figure out a climate resiliency plan and will be fearful if they do it poorly, they might not win a grant.

A few of the requests are clearly in favor of incumbent ISPs, such as any requirement that might force a State broadband office to consider non-traditional ISPs like cities.

And a few requests are things that concern all ISPs, such as the NTIA requiring broadband rates that are too low to make a business plan work.

Just as interesting are the items not included on the list. Small ISPs are worried about the requirement to have a certified letter of credit – something that doesn’t concern large ISPs. Not having this on the list makes me think the Senators are being prompted by big ISPs.

This blog is not meant as a criticism of the Senators’ suggestions. Every constituency in the country is going to have its own wish list of things the BEAD grants should emphasize or deemphasize. I’m hoping to collect these as I see them – it will be interesting when the dust clears to see who had the most influence on the BEAD rules.

Are BEAD Grants Large Enough?

One of the biggest questions associated with the $42.5 billion BEAD grant program is if that is enough money to solve the national rural digital divide. The funding will be allocated to states in a three-step process. First, States will get an automatic $100 million. Next, $4.2 billion will be directly allocated to States using the relative percentage of locations in each state defined as unserved and high-cost. This will rely on the new FCC maps, and the NTIA may still refine the definition of high-cost areas. The remaining $38.1 million will also be allocated to States using the new FCC maps, and will also use the relative number of unserved locations in each State.

The funding works out to be around $850 million per state, but the funding will vary significantly by state. Preliminary estimates have a number of states only getting $100 million – Connecticut, Delaware, District of Columbia, Hawaii, Maine, New Hampshire, North Dakota, Rhode Island, and Vermont. The largest estimated allocations are estimated to go to Texas at $4.2 billion and California at $2.8 billion.

States have been doing the math to see if they think the BEAD grant funding will be enough to reach every rural household with good broadband. I’ve only been able to find one article that cites an estimate of the effectiveness of the BEAD grants, but this one example raises some good questions.

The State of Minnesota is estimated to receive about $650 million in BEAD grant funding. In March of this year, the State Legislature approved $110 million for the existing Border-to-Border grant program, with most of the funding coming from federal ARPA funding given to the state. At that time, the State broadband office estimated that the state will need around $1.3 billion in total grant funding to reach everybody in the state. If that is a good estimate, then even after BEAD grants and the $110 million State grants, the state will be $540 million short.

This raises a lot of questions. First, inflation has hit the broadband industry hard, and I’ve seen a lot of estimates that the cost to build broadband networks is between 15% to 25% higher than just two years ago. That means that the $42.5 billion in BEAD funding is not going to stretch nearly as far as was estimated when Congress established the BEAD grants. This also raises the question of how much inflation will further increase costs over the years it’s going to take to build BEAD-funded networks. It’s not hard to imagine BEAD networks still being constructed in 2026 and beyond.

I’ve also seen estimates that the rules established by Congress and the NTIA for the BEAD grants could add as much as another 15% to the cost of building broadband networks compared to somebody not using grant funding. These extra costs come from a variety of factors, including the requirement to pay prevailing wages, expensive environmental studies that are not undertaken for non-grant projects, the requirement of getting a certified letter of credit, etc. The extra grant-related costs and the general inflation in the industry might mean that BEAD projects could cost 30% or more than building the same networks two years ago without grant funding.

This also raises an interesting question about how states allocated ARPA funding to broadband. Minnesota’s allocation of $110 million to broadband from ARPA is smaller than what many other states have done. As an example, my state of North Carolina allocated nearly $1 billion of the state’s ARPA money to broadband, and there are many states that have allocated $300 million or more to broadband. Part of the blame for a state like Minnesota not having enough money to reach everybody could be placed on the Legislature for not allocating much ARPA funding for broadband.

Another interesting question to be addressed is how State broadband offices will deal with areas where a 75% grant is not enough for an ISP to make a business case. From the feasibility work I’ve been doing this year, I think there are a lot more areas that fit the high-cost category than might be expected. The NTIA says that it might allow exceptions for grants up to 100% of the cost of assets – but asking for extra funding will probably open up the possibility for a State to instead fund less costly technologies. It might turn out that finding solutions for the many high-cost areas might be the unpredictable wild card in the BEAD grant process.

Finally, there are going to be areas where a State doesn’t make a BEAD grant award. It’s not hard to imagine a situation where only one ISP asks to serve an area, and a State broadband office decides that the ISP is unqualified to receive funding.

If the Minnesota estimate is even roughly accurate, it’s likely that Minnesota won’t be the only state that doesn’t receive enough BEAD money to get broadband to everybody. We’re not going to know this for sure until ISPs start applying for grants, but it won’t be a surprise if the BEAD grants are not large enough.

Averting a Mapping Disaster?

Alan Davidson, the head of the National Telecommunications and Information Administration, recently announced that the agency is canceling plans to use the first iteration of the new FCC maps that the FCC says will be available by early November. Davidson says that he feels obligated to let the FCC’s challenge process play out before using the mapping data. I’m sure this wasn’t an easy decision, but it says that it’s better to hold out for a more accurate map rather than settling for the first iterations of the new FCC maps.

This decision will clearly add more time and delay to the $42.5 billion BEAD grant program. But the decision to wait recognizes that using incorrect maps would almost inevitably mean lawsuits that could delay the grant program even longer.

The timing of the new maps became unfortunate when Congress mandated that the FCC maps must be used to allocate over $38 billion in grant funding to states. The FCC has been stating all summer that it hopes that the new maps will be relatively accurate and will fix many of the obvious problems in the current broadband maps. If it wasn’t for the pressure of the BEAD grant program, the FCC would have had several cycles of the new maps to smooth out kinks and errors in the reporting before they had to bless the new maps as solid. The NTIA decision to delay relieves the pressure to have the first set of maps be error-free – which nobody believes will happen. I have a hard time recalling any cutover of a major government software system that was right the first time, and the FCC’s assurances all summer have felt more like bravado than anything else.

Over the last few weeks, I’ve been talking to the engineers and other folks who are helping ISPs with the new maps. I didn’t talk to anybody who thinks the new maps will be solid or accurate. Engineers are, by definition, somewhat cautious folks, but I expected to find at least a few folks who thought the new maps would be okay.

I’ve been saying for six months that the likelihood of the new maps being accurate is low, and I was thinking about not writing anything more about mapping until we see what the new maps produce. However, I was prompted to write about mapping again when I saw a headline in FierceTelecom that quoted Jonathan Chambers of Conexon saying that the new maps will be a train wreck. Conexon is working with electric cooperatives all across the country to build broadband networks, which gives the company an interesting perspective on rural issues.

Jonathan Chambers cites two reasons for pessimism. One is the reason I already mentioned, which is that it’s irrational to use the outputs of a new federal mapping system to allocate billions of dollars between states. He says that there are simpler alternatives that would take all of the pressure off the new mapping system. He’s right, but unfortunately, Congress specifically required In the IIJA legislation that the FCC maps be used. It would take an act of Congress to change that ruling.

Chambers is also pessimistic about the challenge process that is being allowed for the new maps. He expects the challenges to be major and ongoing. It seems unlikely that the FCC is prepared to investigate the huge number of protests that could come from every corner of the country claiming that the new maps got the facts wrong.

My discussions with engineers raised other questions not mentioned by Chambers. Some engineers told me that the underlying mapping fabric has a lot of mistakes. This is where CostQuest, the firm that created the new mapping system, laid out the location nationwide of every possible broadband customer. This was a nearly impossible task in the short time the company had to create the maps. I’ve been working for years with local governments that use GIS data to define potential broadband locations, and it’s always a challenge to identify only those buildings where somebody might buy broadband and exclude buildings used for some other purpose.

My biggest concern is that ISPs are still allowed to report marketing speeds instead of actual speeds, and I fear that ISPs will be motivated to overstate broadband speeds in the new maps (like many have done in the old ones). Any areas designated by the maps to already have broadband available at 100/20 Mbps will be declared ineligible for the BEAD grants, and any ISP that wants to protect against being overbuilt has a high motivation to claim that speed – and it seems likely that many of them will do so. I don’t know if this is true, but my interpretation of the FCC map challenge is that the FCC won’t entertain challenges based on speed, but only on the coverage area. If that is true there will be a huge uproar from states and communities that get disadvantaged from deceptive reporting by ISPs.

I’ve also heard from ISPs in the last week that were unable to navigate the new mapping system by the deadline. These are relatively small ISPs, but many of them have built fiber and it’s not good to have them excluded from the maps. I’ve heard from multiple sources that the new mapping system is not easy to use. I’ve heard from ISPs who didn’t have an engineer who was able to certify the maps and just gave up.

I guess we’ll find out in a few months how the first draft of the maps turns out. The FCC says it will release the results by early November. I expect there are a whole lot of folks who are poised to compare the new maps to their local knowledge of actual broadband usage – and then the challenges will begin.

Big Telcos and the BEAD Grants

We’re finally starting to gain a picture of the plans of the big telcos for the upcoming BEAD grants. The bottom line is that some of the big telcos seem to be prepared to pursue the upcoming grants in a major way. Consider the following:

  • At a recent industry conference, Frontier’s CFO said that Frontier has ambitious plans to pursue grants for all of the three to four million rural homes that it serves today with DSL.
  • When the BEAD grants were first announced, AT&T added five million new passings to its goal for 2025, all due to pursuing rural grants. AT&T hasn’t said much about grants since that early announcement.
  • Brightspeed, which purchased twenty states of copper networks from CenturyLink, has made it clear that it will be seeking state and federal grants to build as much fiber as possible. CenturyLink has been aggressively pursuing grants in the states sold to Brightspeed, for the obvious benefit of the new company.
  • Windstream was a big winner in the RDOF reverse auction and has been aggressively pursuing ARPA funding. It seems obvious that the company will also pursue BEAD grants.

The two big telcos that have not said much about grants are CenturyLink and Verizon. There are rumors that CenturyLink is seeking somebody to buy the rest of its copper lines, but it also would not be surprising to see the company come out swinging for grant funding if a sale isn’t forthcoming. Verizon abandoned a rural strategy years ago, and it would be surprising but not impossible to see the company tackle grant funding if the math is good.

The other big ISP that has aggressively been pursuing grant funding is Charter. It would make sense for the company to pursue BEAD grants to fill in around where it has already won the RDOF auctions.

This is an interesting dilemma for rural communities. The telcos all say they will be building rural fiber with grant funding – which is what rural America most desires. But a lot of rural folks blame the big telcos for the current miserable state of rural broadband. It’s the big telcos that stopped maintaining copper, reduced staffing drastically, and basically walked away from rural America. I know a lot of folks who hope that anybody other than the big telcos wins the grant funding in their area.

There are several big fears that I hear voiced about the big telcos winning the grant funding. One is that the big telcos will not follow through after winning the grant funding. Many communities remember how some of these telcos walked away with huge amounts of CAF II funding without doing the promised DSL upgrades. I think the fear is that the big telcos might cut corners and not build to the most remote households in a grant award area. I’ve also heard the fear that the big telcos will accept grants and then decide not to build some areas in a state.

Perhaps the biggest fear about big telcos building rural fiber networks is that we’ll see a repeat of the past. They will build the new network as funded. But if the telcos don’t hire enough technicians or cut corners on maintenance, the fiber networks will deteriorate over time.

This is a real concern because there is a big difference between copper networks and fiber networks. It’s been possible to keep a copper network limping along for decades with minimum maintenance. This is due to the relative simplicity of the DSL technology. There are twenty-year-old DSL cards still limping along, long past the expected economic life. But fiber networks are not likely to be so tolerant. Fiber technology is complicated and precise, and when a card starts going bad, it most commonly means the fiber will go dark. I think the big fear in rural America is that the big telcos will build fiber but let it go dark in 10 or 15 years if they can’t get additional subsidies. This is an impossible scenario to imagine the big telcos demanding future subsidies to keep networks working.

One of the most important aspects of the BEAD grants will be community approval and partnerships with the grant applicants. It will be curious to see if the big telcos seriously court local support for grant applications or do little more than ask for a letter of support when it’s time to file grants. If a community really wants to keep out the big telcos, the best strategy is to partner with somebody you trust more.

Is 75% Grant Funding Enough?

It seemed like a really big deal when the ReConnect program and the new BEAD grants upped the amount of federal grants to 75%. Before this, it was hard to find a grant program that offered more than 50% of the funding.

I’ve created hundreds of rural business plans, and I’m still seeing a lot of situations where a 75% grant is not enough assistance to create a viable ongoing business plan. I’ve recently worked on several business plans that gave me the opportunity to explore this issue in more detail.

People always want me to provide metrics. They want to know generically if a market can work with the available grants. But it’s not that easy. There are multiple variables that impact the amount of grant that is needed. One is the cost per passing – what’s the capital cost to bring fiber past every customer in a given footprint? Equally as important is the expected customer penetration rate. There has to be enough customers and revenues to pay to support any matching funds. Another key variable is broadband prices – you need less grant funding if customers will be paying $70 instead $50 per month. Finally, the newest variable that has entered the picture is the interest rate, assuming that an ISP is borrowing the matching funds. There are other variables that matter to a lesser extent, such as the relative cost of the salaries and benefits for new employees, something that varies significantly from region to region and ISP to ISP.

It is the interplay of these many variables that determine the percentage of grant funding that is needed for any particular ISP in a given market. For example, if two ISPs have the same cost per passing, interest rate, and expected customer penetration, the ISP with the lowest broadband rates will need more grant funding. It’s a fairly intricate algebra problem that every ISP needs to solve.

I’ve created enough business plans that I know there are a whole lot of business plans that are going to require more than a 75% grant to be viable for an ISP. If an ISP doesn’t get enough grant funding, then taking on a new market will drag down the core existing ISP business for decades to come until after the matching funds have been paid for.

The NTIA is going to allow for some grants greater than 75% based upon categorizing areas as high cost. This is a mixed benefit because being classified as high-cost can also mean that the BEAD grants can fund a technology other than fiber. The NTIA hasn’t announced its high-cost parameters yet, but it seems likely that this will be some variation of cost per passing. The agency still hasn’t released that number, and I’m hoping that’s because they are finding out that concentrating on just one of the key variables cannot suffice to define a high-cost area.

Cost per passing is obviously an important variable. It’s going to generally be easier to find a funding solution for a market with an average cost per passing of $10,000 compared to another market with a cost of $15,000. But if the NTIA looks deeper, it might find that the ISP seeing the higher cost per passing might have a viable business plan while the other does not. For example, if the ISP with the highest network costs has higher broadband rates and knows it will achieve a higher customer penetration rate, that ISP might be comfortable accepting a 75% grant, while that may not be nearly enough grant for the second ISP.

When ISPs seek grant funds, they often have to make uncomfortable decisions. I’ve worked with several ISPs recently that finally came to realize that their proposed broadband rates are too low for grant areas. Cooperatives and municipal ISPs want to bring low rates to customers. But the algebra doesn’t lie, and there has to be enough future revenue to satisfy the debt used to finance the matching funds. If that means starting with higher rates, then that’s what is needed to accept grant funding.

I fear that there are a whole lot of ISPs not doing the math that will wonder five years from now why they took the grant funding to expand. The good news is there is usually a way out of a struggling business plan, but it might not be comfortable. It might mean raising rates or going door-to-door to get every possible customer in a market to make it work.

I know that some folks were hoping after reading the first few paragraphs of this blog that I was going to give them the magic metric – a 75% grant will be sufficient in an area that has a cost per passing under $X. I wish it was that simple, but it’s not.

Licensed Spectrum and Broadband Mapping

As I work with clients who are thinking about applying for the BEAD grants, I keep stumbling across new issues that I see as problems. Today’s blog talks about how the BEAD grants in a given location could go sideways because of the NTIA’s decision to declare facility-based wireless technologies that use licensed spectrum to be considered as a reliable technology that is eligible for BEAD grants. I can foresee two different problems that might result from this decision.

There are two kinds of wireless carriers that could qualify under this new definition. First, cellular carriers like T-Mobile and Verizon are aggressively marketing FWA fixed wireless for homes using licensed spectrum. In the not-too-distant future, we can expect AT&T, Dish Network, and probably many of the smaller cellular carriers like U.S. Cellular to deploy the technology using licensed spectrum. The carriers are largely advertising this as 5G, but the actual technology being used for now is still 4G LTE.

The other set of facility-based wireless providers are the fixed wireless WISPs that use a mix of licensed and unlicensed spectrum to deliver broadband from towers. Most of these WISPs are using the licensed portion of Citizen Band Radio Spectrum (CBRS), but they can use other licensed spectrum like 700 MHz or other cellular spectrum purchased at auction in the past.

The first problem I foresee is that these wireless carriers can use the upcoming FCC broadband mapping update to lock down huge areas of real estate from eligibility for BEAD grants. Anywhere that these carriers claim speeds of 100/20 Mbps in the next set of FCC maps will be initially declared by the BEAD rules to be served and ineligible for grants.

Unfortunately, the new mapping rules allow for this since ISPs can claim marketing speeds in the FCC mapping. I’m positive that many WISPs will declare the speeds that will classify their areas as served, because many of them already have been reporting these speeds in the past. In just the past year, I’ve worked with at least thirty counties where at least one wireless ISP claimed countywide coverage with broadband  – in some cases at speeds of 100 Mbps or faster. These WISPs might have the 100/20 Mbps capability for some customers close to a tower, but it’s impossible to be able to deliver those speeds to everybody across an entire county.

To use an example, I talked to a farmer recently who is thrilled to get the new T-Mobile FWA product at the farm. The tower is on his property, and he is getting 200 Mbps downloads. But the stories from his neighbors are quite different. One neighbor less than a mile away is seeing 75 Mbps download speeds. A few other neighbors two miles or more away claim the broadband is unusable. If T-Mobile was to claim a fairly wide coverage for this technology in the FCC maps, it would be blocking BEAD grant money inside whatever areas it claims.

But let’s say that T-Mobile reports honestly. Under the new FCC mapping rules. a wireless ISP is supposed to input a wireless propagation map like the one below. This map is typical of wireless coverage in that the wireless signal travels further in directions where it is unimpeded. But this example propagation map doesn’t tell the whole story because you might imply that the speeds are the same over the whole propagation area. My farmer example shows that wireless speeds can drop off rapidly with distance from a tower. A map of a 200 Mbps coverage area or even a 100 Mbps coverage area will be tiny for a wireless ISP. The map that should be input to the new FCC maps is just the areas that can get good broadband speeds. In the propagation map below, probably 80% of the green areas probably don’t even see one bar of broadband. It’s also worth noting that the propagation map is not fixed – the coverage area changes with temperature, precipitation, and more mundane factors like the amount of backhaul provided to a given tower.This raises the second issue. If the wireless carriers with fast licensed spectrum report properly in the new maps, there are going to be splotches of areas around every rural cell tower that will be off-limits for grants. In the same way that the swiss cheese RDOF awards goofed up anybody else from bringing a fiber broadband solution, these fixed wireless or cellular blotches will make it hard to build a coherent network in areas that have to avoid the wireless areas. In a real deployment, An ISP will likely build to everybody in an area – but because of the mapping rules, they won’t get grant funding everywhere. I can’t even begin to imagine how somebody building a fiber network is going to properly account for assets that are inside and outside of areas that are supposedly already served.

I wonder if the NTIA understands what it has done. The agency seems to have worked very hard to avoid the problems the FCC caused in the RDOF reverse auction. But this ruling brings in one of the most damaging aspects of RDOF – incoherent grant serving areas. I know there is a challenge process for the maps used for BEAD, but it’s going to be extremely difficult to dispute an ever-changing propagation map around every cell tower or fixed wireless radio. I fear this is going to be one of the newest nightmares to pop out of the revised FCC maps.

Should Grant Networks Allow High Prices?

I wrote a blog yesterday about a grant application filed in Nebraska by AMG Technology Investment Group (Nextlink Internet). This is one of the companies that won the RDOF reverse auction at the FCC but is still waiting to hear if it will be awarded the FCC subsidy funding.

One of the things that caught my eye on the grant request was the proposed broadband rate. Nextlink is proposing a rate of $109.95 for a 2-year contract for 100/100 Mbps. I have to assume that the rate without a 2-year contract is even higher – or maybe a customer can’t buy broadband for less than a 2-year commitment.

Today’s blog asks the question – should higher-than-market rates be allowed on a network that is being subsidized with public funding? This is not the first time I’ve seen a rate that high, and I can recall at least two other RDOF winners planning on basic rates of at least $100. One example is Starlink, which also has not yet been approved by the FCC for RDOF and which has a $110 rate.

I don’t think there is any question that a $110 rate is higher than the market. Should an agency that awards grants or other broadband subsidies somehow insist that broadband rates are somehow tied to market rates? That’s a lot harder question to answer than you might think because the question implies that these agencies have the power to regulate or cap broadband prices in grant areas.

The Ajit Pai FCC voluntarily gave away the right for the FCC to regulate broadband rates when it gave up Title II authority. It’s not clear if that decision has any bearing on other federal agencies that award grants like NTIA, EDA, and USDA. Can these federal agencies insist on affordable rates for ISPs that take federal funding? If not, can the agencies at least consider rates when deciding who gets grant funding – can these agencies assign fewer qualifying grant points to somebody with a $100 basic rate compared to somebody with a $50 rate?

I think we got a hint that considering rates is probably allowed since Congress made it clear with the BEAD legislation that the NTIA has no authority to regulate rates – this implies that without that specific Congressional mandate that the NTIA might have had that authority. But even the specific BEAD edict might not mean that rates can’t be considered in BEAD grants.

It’s an even fuzzier question if a State has the right to set rates. There have always been two schools of thought about the scope of State versus Federal authority in terms of regulating broadband. I’ve heard it argued that a State’s right to regulate broadband rolls downhill from the federal ability to regulate. If you believe in this philosophy, then a State’s right to regulate broadband rates was severely weakened when the FCC gave up its rights. But I’ve also heard just the opposite argued – that a State has the right to step into any regulatory void left by federal regulators. We recently saw this concept in action when courts recently upheld California’s right to implement net neutrality rules after the FCC washed its hands of such authority. If you accept this view of regulation, a State can tackle rate regulation if the FCC refuses to do so.

To be fair to Nextlink, the company also offers less expensive broadband rates. Its fixed wireless products, rates start at $69.95 for a 15 Mbps download connection. Fiber prices start at $49.99 for a 25 Mbps download speed. But these lower rates for slower speeds raise more questions for me. Many of the current broadband grants require building networks that can deliver at least 100/100 Mbps broadband. Should an ISP be able to use a grant-funded network to offer anything slower? The whole point of these grant programs is to bring faster broadband across America. Should a network that is funded with public money be allowed to set slower speeds for the most affordable options? If so, it’s hard to argue that the ISP is delivering 100/100 Mbps broadband everywhere. If the agencies awarding grants can’t demand affordable rates, perhaps they can demand that 100/100 Mbps is the slowest product that can be offered on a grant-subsidized network. Nobody is forcing ISPs to accept grant funding and other subsidies, but when they elect to take public money, it seems like there can be strings attached.

I also wonder if ISPs benefitting from a grant-subsidized network ought to have the ability to force customers into long-term contracts? It’s not hard to make the case that the public money paying for the network should justify public-friendly products and practices.

As a final note, this topic highlights another glaring shortfall of awarding subsidies through a reverse auction rather than through grants. With RDOF, the reverse auction determined the winner of the subsidy first, and then the FCC proceeded to find out the plans of the subsidy winners. There were no pre-determined rules for issues like rates that an RDOF winner was forced to accept as part of accepting the public money. Let’s not do that again.

The Challenges for Broadband Grant Offices

I read an article recently in LightReading that discusses the efforts by the NTIA and the States to hire the people needed to administer the upcoming BEAD grant program. The article cites Commerce Secretary Gina Raimondo telling a Senate subcommittee that NTIA needs to hire 100 staff to administer the BEAD grants. Many states are starting from scratch to assemble a broadband office, and even states that have such a group are staffing up for the big crunch coming with the effort to award and administer billions of dollars of grants.

People might wonder why so many people are needed for the effort. I think that being in charge of a state broadband grant office has to be one of the toughest gigs in the country right now. The main purpose of today’s blog is to give folks an idea of the huge challenges facing each state broadband office over the next few years.

One of the first things each state will have to do is to develop a detailed broadband plan that describes how the BEAD grant program will work. The BEAD grant rules are complex. I have forty years of regulatory experience, and I see some new subtlety in the grant rules every time I read them. States somehow need to understand all of these subtleties and cobble together a state broadband grant plan that meets all of the requirements.

Each state grant office is required by the Congressional rules to reach into every niche and corner of the state to get input from constituents about what should be included in the state broadband plan. Anybody who has ever done that kind of outreach knows it’s hard – everybody in the state is going to want to be heard, even though most stakeholders will not understand the nuances of what the grants can and cannot accomplish. The demand for outreach meetings will require more hours than is available to hold meetings.

And then there is the politics. In some cases, the state legislatures have gotten involved and proposed laws that would modify or interfere with the grant process. But even when that isn’t the case, a broadband office is going to hear from every federal, state, and local politician who wants to make sure their constituency is taken care of. In many states, the governor’s office is going to have a heavy hand in the grant process.

At some point, the preliminary planning work will be done, a grant program will be put in place, and communities and ISPs will begin filing grant requests. The states will have a giant challenge of reviewing the grant requests. Most of the folks reviewing the grants will be relatively new to the broadband industry and will not find it easy to judge ISP business plans. Reviewing grants isn’t easy, even for people with many years of broadband experience. The grant review process has been made particularly complex by the NTIA rules that request a huge amount of input from a grant filer. It’s going to be hard for a grant reviewer to identify the half dozen most important facts in each grant request amongst the answers to hundreds of questions.

One of the biggest challenges of reviewing and choosing grant winners is that there are so many different uses for the funds – broadband last mile, anchor institutions, low-income apartments and neighborhoods, and various digital divide uses. States will somehow have to decide how to judge and balance grant awards between these various areas.

After awarding grants, the state broadband office will become the agency that will pay out grant funds. Grant funds are dispersed based upon real invoices, and a grant office will have to make the big pivot from reviewing grants to administering the funds and deciding if the submitted invoices match the intentions of an awarded grant. This is not an easy transition since the skill set for reviewing grant requests is different than the process of reviewing and verifying invoices.

After the grants are awarded, the grant offices will also require detailed status updates from each grant recipient, along with the obligation to somehow consolidate those updates into a report from each state to the NTIA. That’s a lot of paper to process every six months.

I wrote this blog because I’m not sure that many people in the industry appreciate the huge effort that will have to take place at the state grant offices behind the scenes. All of this workload comes with a shot clock ticking at all times and pre-determined deadlines that must be met. It’s hard to imagine that working in a state broadband office will be anything short of chaotic for the next four or five years.

I hope that industry folks grasp the complexity of the undertaking and are especially nice and understanding to the folks in the broadband grant offices – they are going to need it.

Grants and Upload Speeds

The NTIA set a new definition of broadband at 100/20 Mbps for purposes of the BEAD grants – if a customer fails that test they are considered either unserved or underserved. Everybody nationwide has been so focused on download speeds that we are largely ignoring the fact that a huge number of nationwide broadband customers are not getting upload speeds of 20 Mbps. All of the speed test efforts I’ve seen have focused on whether homes and businesses are receiving 100 Mbps download and have largely ignored any implications of customers not achieving the NTIA’s 20 Mbps upload stream to qualify for a broadband grant.

My consulting firm helps clients conduct a lot of speed tests, and I also have been poring through the large number of speed tests gathered by Ookla and MLabs. I mostly work in rural counties, county seats, and suburban cities. I would venture to say that the vast majority of speed tests we see from cable customers do not meet the upload speed. The same is true for a large percentage of WISPs.

Sometimes the evidence is overwhelming. I recently worked with a county seat of about 20,000 people and the only customer in the community seeing upload speeds of 20 Mbps or faster were those who subscribed to the cable company’s gigabit product. Not one other cable customer had a 20 Mbps, and most weren’t even close, with an average of 11 Mbps. This was true for customers buying both a 100 Mbps, 200 Mbps, and 400 Mbps download product.

This raises an interesting question, which I’m sure is going to be the core of the cable company’s response to this question. In that particular city, the gigabit customers were getting upload speeds between 30 Mbps and 40 Mbps. I’m sure the cable company will argue that since a few customers are getting speeds over 20 Mbps that the network is capable of faster speeds.

I’ve talked to several knowledgeable engineers on the topic, and they tell me that the cable company in this case could not give faster speeds to everybody – or they would. The cable company is somehow giving a preference for gigabit customers at the expense of everybody else. If the cable operator opened the gates for everybody to get the fastest upload speed possible, the likely outcome would be that the gigabit customer speeds would drop to match everybody else’s speeds – the other customers would not get any faster.

This is an interesting question for state broadband grant offices to consider because it’s inevitable that people are going to seek grants where there is a cable company operating, using the argument that the cable company doesn’t meet the NTIA’s definition of broadband.

It makes sense to me that an ISP must meet both components of the speed definition to be considered as served. It shouldn’t matter if an ISP misses on the download or upload speed – if it fails one of the two benchmarks, it is not meeting the NTIA’s definition of served. If you don’t believe that logic, consider an ISP that is delivering 50/20 Mbps on licensed fixed wireless. I think there would be a consensus that this customer is not served since it is achieving only half of the definition of download speeds. But isn’t the same true for an ISP that is delivering 120/10 Mbps broadband?

To be fair to cable companies, they deliver speeds greater than 20 Mbps in many markets. I buy 400 Mbps download from Charter and routinely see upload speeds of 30 Mbps. But we all know that the performance of cable companies varies widely from town to town, and often inside of a town.

I had to laugh last year when the big cable companies fought so hard to reduce the definition of served from 100/100 Mbps to 100/20 Mbps. I knew then that this battle would be coming since the majority of cable customers, at least in the markets I have studied, are not seeing upload speeds of 20 Mbps.

One thing I think we can all count on is that if any grant office awards funding to overbuild a cable company because of this issue, we’re going to see the cable industry go ape. They’ve been quiet about the poor upload speeds, but they won’t stay that way if they see grant money coming to overbuild them.

BEAD Funding for Anchor Institutions

One of the aspects of the $42.5 billion BEAD program that many communities might have overlooked is that communities can request grants to bring fast broadband or improve existing broadband to anchor institutions.

Section I.C.f. of the BEAD Notice of Funding Opportunity (NOFO) defines a community anchor institution as an entity such as a school, library, health clinic, health center, hospital or other medical provider, public safety entity, institution of higher education, public housing organization, or community support organization that facilitates greater use of broadband service by vulnerable populations, including, but not limited to, low-income individuals, unemployed individuals, children, the incarcerated, and aged individuals. An Eligible Entity (the State Broadband Office) may propose to NTIA that additional types of institutions should qualify as CAIs within the entity’s territory.

The first thing to note is that this expands the definition of anchor institution beyond the traditional list by adding organizations that facilitate the use of broadband by vulnerable populations. This means that the grants can be used to bring better broadband to organizations that want to help low-income individuals or others who need better broadband. This is an interesting concept that makes it possible to build broadband facilities to the offices of non-profits or perhaps a computer training center. My interpretation of the BEAD rules is that the grant funding could also be used to construct a training center and buy the needed computers.

This is one of the more interesting sections of the BEAD program because it doesn’t seem to be restricted to only anchor institutions that can’t already buy broadband with 100/20 Mbps speeds. We’ll have to see how states interpret the rules, but it seems like funding could be used to upgrade speeds to anchor institutions. It might also be possible to use this funding to add anchor institutions to a fiber network that would eliminate the need for having to buy commercial broadband – much like school systems often build private networks.

I must be honest in that I historically disliked grant programs that were built only for anchor institutions. The 2009 BIP and BTOP grants were used to build many middle-mile fiber routes across the country. Those grants required grant winners to drop off of the middle-mile routes to serve any anchor institutions in rural areas. This meant that fiber was often built into small rural towns to serve only the city hall and the library and nothing else. Certainly, these anchor institutions needed broadband, but so did all of the residents and businesses in these towns. In actual practice, delivering broadband to only anchor institutions made it harder to justify a rural broadband build to reach everybody else since the anchor institutions were no longer potential customers.

I think the BEAD grants are different. The BEAD grants are aimed at building broadband across large rural areas and will be required to serve everybody in those areas, including anchor institutions. I interpret the anchor institution language to be aimed at towns and cities and not rural areas.

Larger towns and cities got broadband networks constructed to serve anchor institutions in the 1970s by cable companies that provided broadband as a condition for granting a cable franchise. However, these networks are either no longer free or have been discontinued as cable companies have lost nearly twenty million customers in just the last few years. The BEAD grants hold out the possibility for a community to construct a new government network to replace the old networks that were once provided by the cable companies – and to a large universe of eligible anchor institutions.

I would hope that cities will not repeat the sins of BTOP and build a broadband network in such a way as to ignore the rest of the community. For example, another provision of BEAD allows funding to be used to bring better broadband to low-income apartment buildings or complexes, and I hope any urban networks will address multiple needs.

This is one of the pieces of BEAD funding that I don’t think is automatic. It’s up to states to put some muscle behind this possibility if it wants to see these kinds of grant awards. I have no doubt that the large ISPs are going to hate this provision since it could fund fiber networks in urban areas. And I am certain that some states will follow the lead of the big ISPs and make it hard to qualify for this kind of grant.

However, the BEAD rules allow for these kinds of projects, and communities should assess their broadband needs for anchor institutions and begin the process of lobbying the State broadband offices to make such grants available. While the big ISPs might hate this idea, there is no reason that this kind of grant can be used to create a public-private partnership with a big ISP or somebody else. I think cities are going to have to be creative to win and implement these grants – but it is well worth the effort.